The fateful day at Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA), the expiry of its US patents for Copaxone, passed on May 24 with no dramatic incidents. While the expiry allows the launch of generic versions of Teva's flagship product for the treatment of multiple sclerosis, no company has yet obtained US Food and Drug Administration (FDA) certification for generic Copaxone.
Even if certification comes soon, which is by no means certain, Teva's legal proceedings against generic companies is continuing, and if Teva wins the cases after a generic version of the drug is launched, the generic company will have to pay huge compensation to Teva.
The FDA approved Copaxone for sale in the US in 1996, and the drug became Teva's cash cow. It is responsible for more than half of the company's profits in recent years (46% in the first quarter of 2014), and the US is the largest market. Teva's revenue from Copaxone sales in the US totaled $13 billion in the past five years.
As part of Teva's struggle against potential generic competition, it has invested heavily in switching patients to a new double dosage (40 mg) of Copaxone, which is administered three times a week instead of daily. The company believes that a patient who switches to the new dosage will not switch back to the daily injections of a generic version. It also assumes that any delay in a generic launch will be materially important for the company's finances.
Citi Research believes that there is little likelihood of an at risk launch of generic Copaxone, and that there is a chance for a settlement with Momenta Pharmaceuticals Inc. (Nasdaq: MNTA), which has developed a generic version of the drug.
On the other hand, Goldman Sachs has included in its model a 50% chance of generic competition by the third quarter, although it notes that the timing is uncertain. It says that volatility in Teva's share will continue in the short term and that if generic Copaxone is launched within a month, Teva's share price will fall by 5-10% because the market does not expect a launch at this time. If, however, there is no generic launch before the end of the year, the share price could reach $60 (a 16% premium on Friday's close of $51.77 on the New York Stock Exchange). Goldman Sachs advises buying put options on Teva as a downside hedge.
Published by Globes [online], Israel business news - www.globes-online.com - on May 25, 2014
© Copyright of Globes Publisher Itonut (1983) Ltd. 2014